The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at toddstrade@gmail.com
I am always open to questions, comments, or suggestions on how to improve this blog.


Monday, March 16, 2009

the 3-10 first cross

The "first-cross" method was something I became aware of through an audio presentation given by Linda-Bradford Raschke. This method uses the 3-10 momentum indicator (which you can read about thanks to AfraidtoTrade.com here and, to a lesser extent here).
The rules are simply (for a long position) buy the first pullback in the fast oscillator after the slow line crosses above zero for the first time. Obviously for a short the rules are simply the reverse; sell the first pullback in the oscillator after the slow line crosses below zero for the first time. Essentially, this method is indicating a higher high/lower high and, therefore, a place to enter a trend.
To demonstrate, here's a chart from today in HES. I didn't take the first long trade, but I did trade the short position later in the day.

It can certainly be applied to any timeframe, so long as you adjust your risk management appropriately.

2 comments:

David L. Spurr said...

Great Interesting piece. I use TOS for my charts and they have a programming language that allows you to plot indicators you construct. I reworked the MACD indicator with the simple moving averages. Here's the code for anyone using TOS:

declare lower;

input fastLength =3;
input slowLength = 10;
input MACDLength =16;


def fastAvg = simpleMovingAvg(close, length = fastLength);

def slowAvg = simpleMovingAvg(close, length = slowLength);

plot Value = fastAvg - slowAvg;

plot Avg = simpleMovingAvg(Value, length = MACDLength);

plot Diff = value - avg;

diff.AssignValueColor(if diff >= 0 then Color.UPTICK else Color.DOWNTICK);

Diff.SetPaintingStrategy(PaintingStrategy.HISTOGRAM);

plot ZeroLine = 0;

Diff.SetDefaultColor(GetColor(5));
Avg.SetDefaultColor(GetColor(8));
Value.SetDefaultColor(GetColor(1));
ZeroLine.SetDefaultColor(GetColor(0));


Enjoy,

DS

http://displacedema.blogspot.com

Trader32 said...

I use the 3-10 MACD and find the 'slow line' is an excellent tool for seeing and anticipating momentum in the market.

The first cross trade that Linda describes occurs often and can provide some nice trades. The beauty is that you know quickly when you are wrong.

The video is well worth a watch and the ebook is also very helpful.

Trader32